River Park, Inc. v. City of Highland Park

This case arises from the efforts of plaintiffs River Park, Inc., Spatz & Company, and Country Club Estates, Ltd., to develop a parcel of real estate located within defendant City of Highland Park. After defendant failed to approve their plan to develop the property and their request for rezoning, plaintiffs sought relief under 42 U.S.C. §1983 (1994) by filing a complaint against defendant in federal court. Following the dismissal of their federal cause of action, plaintiffs asserted various violations of state law in an amended complaint filed against defendant in the circuit court of Lake County. The circuit court dismissed this complaint pursuant to defendant's motion to dismiss under section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 1996)). The circuit court found that (1) the dismissal of plaintiffs' federal complaint barred their state claims under the doctrine of res judicata, and (2) plaintiffs' state claims were also barred by the one-year statute of limitations contained in section 8-101 of the Local Governmental and Governmental Employees Tort Immunity Act (745 ILCS 10/8-101 (West 1996)). The appellate court affirmed the circuit court's dismissal of plaintiffs' claim for tortious interference with business expectancy, but reversed its decision to dismiss plaintiffs' claims for breach of implied contract and abuse of governmental power and remanded the cause for further proceedings on these counts. 295 Ill. App. 3d 90. We granted defendant's petition for leave to appeal. 166 Ill. 2d R. 315. We reverse in part the judgment of the appellate court on the basis that plaintiffs' state claims were barred by the doctrine of res judicata.

BACKGROUND

According to the allegations of plaintiffs' amended complaint, which we take as true for purposes of our review of the rulings on defendant's motion to dismiss (see Calloway v. Kinkelaar, 168 Ill. 2d 312, 325 (1995)), River Park, Inc. (River Park), had an ownership interest in a 162-acre piece of land in the City of Highland Park known as the Highland Park Country Club (Country Club). Plaintiff Spatz & Company (Spatz) was a builder and had purchased the capital stock of River Park. Spatz's purchase of the capital stock was financed in part by a loan from LaSalle National Bank of Chicago (LaSalle). The loan was secured by a mortgage on the Country Club property. Plaintiff Country Club Estates (CCE) was a limited partnership and purchased a portion of the Country Club property from River Park in 1991.

In July 1988, Spatz petitioned defendant on behalf of River Park to obtain approval for its plans to develop the Country Club property. In the petition, Spatz requested that defendant change the zoning classification of one portion of this property from R-1 to R-4. The petition also included a request for approval of a planned residential development on the property.

Between April 1988 and October 1989, Spatz appeared at numerous hearings before the City of Highland Park plan commission. While Spatz's petition was pending before the commission, a city council member, Raymond Geraci, formed a citizen's group named "Save the Open Space," the purpose of which was to encourage defendant to purchase the property in order to prevent Spatz's planned development. Geraci also proposed at city council meetings that defendant purchase the property in order to prevent Spatz's development. Without Spatz's knowledge, the city council ordered studies to assess the economic feasibility of defendant's purchase of the property.

On November 14, 1989, the commission approved the zoning change Spatz had proposed. The commission also approved the planned development, with certain modifications. On November 22, 1989, the commission provided the city council with an unconditional recommendation for approval of the zoning change and the planned development.

Between November 1989 and January 22, 1990, Spatz appeared before the city council three times to discuss the commission's recommendation. During this time, the city council received the results of the feasibility studies in executive session. The city council did not, however, communicate to Spatz that it was interested in purchasing the property. On January 22, 1990, the city council adopted the commission's zoning recommendation and approved the preliminary development plan.

For Spatz to obtain final approval, defendant's zoning ordinance required it to provide the commission and the city council with final engineering plans and a final development plan that conformed with the preliminary plan. In addition, Spatz was required by defendant's zoning ordinance to obtain the city engineer's verification that the engineering plans complied with applicable statutes and ordinances. According to the ordinance, if a developer failed to receive the city engineer's approval of the engineering plans within one year of preliminary plat approval, the development plan would be deemed withdrawn.

In April 1990, Spatz submitted the final engineering plans to the city engineering department. The city engineer refused Spatz's requests to review or discuss the plans until October 5, 1990. At that time, defendant's engineers and Spatz's engineers agreed that, with certain modifications and corrections, 95% of the engineering plans were complete and satisfied all of defendant's requirements. Defendant's engineers agreed to review the remaining 5% of the plans by December 1, 1990, and provide criteria for completion of those plans. Spatz made the necessary corrections for the 95% of the plans already reviewed by defendant's engineers, but the city engineer refused to review either the corrected plans or the other 5% by the December 1 deadline. Spatz requested that its rezoning petition be placed on the city council agenda so that Spatz could obtain the council's approval of its plans prior to January 22, 1991, the date on which the engineering review period would expire. Based on the city engineer's failure to act on the plans, however, the city council refused Spatz's request to place the petition on its agenda.

Defendant was aware of Spatz's and River Park's financing arrangement with LaSalle and were advised by their attorney that, without approval of the final development plans by January 22, 1991, LaSalle would foreclose its mortgage on the Country Club property. On January 22, 1991, the city council withdrew its preliminary approval of the plans and informed Spatz that, in order to have the zoning of the Country Club property changed, it would be required to start the commission review process from the beginning.

As a result of defendant's failure to approve the final development plans, River Park was forced to declare bankruptcy. As part of the bankruptcy reorganization plan, River Park entered into an agreement to sell 34 acres of the Country Club property to CCE. In March 1991, River Park, Spatz, and CCE filed a new petition with defendant, in which they requested R-4 zoning only for the 34-acre parcel purchased by CCE. Again, plaintiffs participated in public hearings on the petition before the commission. The transcript of these hearings was delivered to the commission on June 29, 1992. Under defendant's zoning ordinance, the commission had 45 days from this date to vote on the petition.

In June 1992, LaSalle instituted foreclosure proceedings on the Country Club property. Plaintiffs entered into an agreement with LaSalle whereby they would continue to pursue rezoning and would have the right to redeem the property if their efforts were successful. Defendant was aware of this arrangement with LaSalle. Without plaintiffs' knowledge, however, defendant negotiated with LaSalle for the purchase of the mortgaged property while the second petition for rezoning was pending.

On July 21, 1992, the commission adopted a resolution requiring plaintiffs to submit proof of their ownership of the subject property by August 11, 1992. The resolution further provided that the commission would deem the petition withdrawn if it did not receive plaintiffs' evidence of title by this date. Plaintiffs challenged the commission's authority to require them to provide evidence of ownership. Nevertheless, they notified the commission that they had requested proof of title from LaSalle but would be unable to obtain this documentation by August 11, 1992. The commission refused to grant plaintiffs an extension of time. When plaintiffs attempted to present proof of ownership at a later commission meeting, the commission informed plaintiffs that their petition had been deemed withdrawn and that they would be required to once again start the rezoning process from the beginning.

Subsequently, defendant purchased the Country Club property from LaSalle for $10 million, a price far below the market value of the property. According to plaintiffs' information and belief, defendant sold or attempted to sell substantial portions of this property to others for residential development. Based on these alleged events, on February 23, 1993, plaintiffs filed a two-count complaint against defendant in the United States District Court for the Northern District of Illinois. In this complaint, plaintiffs asserted that defendant was liable pursuant to 42 U.S.C. §1983 (1994) for depriving them of their property rights without due process of law in violation of the United States Constitution. According to plaintiffs, they had a legal entitlement to approval of their engineering plans and to the rezoning they requested. They alleged that defendant's failure to act on the plans and vote on their second petition deprived them of this property right without due process of law. The complaint alleged no claims under state law.

Defendant filed a motion to dismiss plaintiffs' federal complaint for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(1), (b)(6). On July 22, 1993, the district court issued a written order in which it found that plaintiffs' had failed to allege a violation of due process. The court therefore granted defendant's motion and dismissed plaintiffs' complaint with prejudice. River Park v. City of Highland Park, No. 93-C-1179, slip op. at 11-12 (N.D. Ill. July 22, 1993). On April 25, 1994, the United States Court of Appeals for the Seventh Circuit affirmed the dismissal of plaintiffs' federal complaint. River Park, Inc. v. City of Highland Park, 23 F.3d 164 (7th Cir. 1994).

Having failed in their attempt to obtain a remedy for defendant's actions in federal court, plaintiffs filed a six-count complaint against defendant in the circuit court of Lake County on November 21, 1994. On March 15, 1995, they filed an amended complaint, which added a seventh count. The theories of relief asserted in plaintiffs' amended complaint were based on state law and included, inter alia, (1) tortious interference with business expectancy, (2) breach of implied contract, and (3) abuse of governmental power. In the tortious interference with business expectancy count of the amended complaint, plaintiffs alleged that they had a reasonable expectation of entering into profitable sale and development contracts and that defendant had intentionally interfered with this expectancy by delaying the rezoning and plat approval process in order to acquire the property at a price less than market value. With respect to their claim for breach of implied contract, plaintiffs alleged that, by accepting the fee they paid for processing their zoning petition, defendant entered into an implied contract to process this petition in good faith. They alleged that defendant breached this agreement by prolonging the zoning process, by failing to review the engineering plans within a reasonable period of time, and by deeming their application withdrawn. In the abuse of power count of their amended complaint, plaintiffs alleged that, by forcing them into bankruptcy and foreclosure in order to acquire their land at a reduced price, defendant abused its power under the Illinois Constitution to acquire private property for public use in exchange for just compensation. In each of these counts, plaintiffs requested damages of $25 million. They requested an additional $25 million in punitive damages for their abuse of governmental power claim.

Defendant filed a motion pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 1994)) to dismiss plaintiffs' amended complaint in its entirety for failure to state a claim. The circuit court granted defendant's motion and dismissed all counts of plaintiffs' complaint with prejudice.

On appeal, the appellate court affirmed the circuit court's dismissal of all but three of the counts included in plaintiffs' amended complaint. The appellate court found that the circuit court had erred in dismissing the counts of plaintiffs' complaint involving tortious interference with business expectancy, breach of implied contract, and abuse of governmental power. The court remanded the cause for further proceedings on these counts. River Park, Inc. v. City of Highland Park, 281 Ill. App. 3d 154 (1996) (River Park I).*fn1 This court denied the City's petition for leave to appeal from this decision. River Park, Inc. v. City of Highland Park, 168 Ill. 2d 624 (1996). On remand, defendant moved to dismiss the remaining three counts of plaintiffs' amended complaint. Defendant requested that these claims be dismissed pursuant to section 2-619 of the Code of Civil Procedure on the basis that (1) plaintiffs' claims were barred under the doctrine of res judicata by the dismissal of plaintiffs' federal complaint, and (2) the one-year statute of limitations contained in section 8-101 of the Local Governmental and Governmental Employees Tort Immunity Act (745 ILCS 10/8-101 (West 1996)) (Tort Immunity Act) barred plaintiffs' claims. The circuit court granted this motion and dismissed plaintiffs' complaint with prejudice.

Plaintiffs again appealed the dismissal of their complaint to the appellate court. The appellate court affirmed the circuit court's dismissal of plaintiffs' tortious interference with business expectancy claim, but it reversed the dismissal of their claims for breach of implied contract and for abuse of governmental power. 295 Ill. App. 3d 90 (River Park II).*fn2 The appellate court found that plaintiffs' state claims were not barred by the doctrine of res judicata. According to the appellate court, the dismissal of plaintiffs' federal complaint was not an adjudication on the merits because it was based on lack of subject matter jurisdiction as well as failure to state a claim. In addition, the court found that the doctrine of res judicata did not apply because the cause of action asserted in plaintiffs' federal complaint differed from the cause of action alleged in the complaint they filed in state court. River Park II, 295 Ill. App. 3d at 94. Although the appellate court found that plaintiffs' claim for tortious interference with business expectancy was barred by the one-year statute of limitations contained in section 8-101 of the Tort Immunity Act, it held that this provision did not apply to plaintiffs' claims for breach of implied contract and abuse of governmental power. The court reasoned that section 2-101 of the Tort Immunity Act (745 ILCS 5/2-101 (West 1996)) exempts contract actions from the provisions of the Act and that the Act has been held to be inapplicable to violations of constitutional rights. The court concluded that the ...

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